Managing Your Money

When you apply for funding, you will need to set out your projected Income and Expenditure to demonstrate your budget will balance, and your event will be financially viable.

Income & Expenditure

Use a spreadsheet to draw up a budget of projected income and expenditure for the project. If you are VAT registered, you should use figures excluding VAT for this. [See Sample Budget]

Income
Sources of income fall into 2 main categories:
a) Earned income: ticket sales, merchandising, catering etc
b) Unearned income: public sector grants, donations from individuals or trusts/foundations etc.

a) Earned Income
Many events are free, such as open air street performances. If, however, you are able to make a charge for entry, thought needs to be given to setting the price at the right level. If the price is too high, it will deter some people, such as those wanting to bring their families. If it is too low, you will certainly get a good audience, but may not generate sufficient income to cover your costs.

Remember that if you are a VAT registered organisation, you need to include VAT in your ticket prices. [NB some attractions are now eligible for cultural exemption for VAT - See Customs & Revenue website - HMRC Reference: Notice 701/47 (December 2003)]

If you are using outside caterers, you will not normally benefit from any income from catering. You may, however, be able to charge them a small fee in return for the extra business generated, or else you could negotiate a percentage of their profits as a commission.

Similarly, if you are selling merchandise on behalf of a performer, such as CDs, you could negotiate a commission payment or handling fee, eg 10% of the sales price.

Unlike donations which are given without anything being received in return, sponsorship is a payment made in return for certain benefits, such as advertising. This is classed as earned income, and is subject to VAT.
[See Introduction to Sponsorship]

Don't forget that bank interest on funds held is also classed as earned income.

b) Unearned Income
For many festivals and events, earned income accounts for only a small percentage of their total budget. This is because they cannot make a commercially viable entry charge which would cover their costs. Consequently they rely heavily on donations from individuals, trusts and foundation, and grants from various funding bodies, including local authorities and the Lottery.
[See Introduction to Fundraising]
There is no VAT on this income.

Gift Aid
If you are a registered charity, don't forget you can claim an extra 28% on donations from UK taxpayers through the Gift Aid scheme. You will need to get a declaration from the donor to confirm they are a UK tax payer, and pay enough tax to cover the tax reclaimed by the charity - you can design your own declaration, providing it contains the necessary wording and requests the full name and home address of the donor. [See the HM Revenue & Customs website for further details: http://www.hmrc.gov.uk/charities/donors/gift-aid.htm]

[See Gift Aid and Sample Gift Aid Declaration]

Expenditure
You should list each item of expenditure for your project - grouping them together under headings will help.

Example:
Overheads - administration costs, office rental, telephone,
Festival/Event site costs - hire of land, marquee, catering equipment, staging
Artistic costs - performers' fees, accommodation, travel, hire of instruments
Marketing costs - print of leaflets/flyers/programmes, PR consultant, launch event

Balanced Budget
The total of your income should be equal to or greater than the total of your expenditure. If your expenditure is higher, you need to look at cutting some of your costs, or finding additional sources of income until they balance.
If your income is greater than expenditure, you should make a profit or surplus on your event. Remember that if you are applying for funding from the public sector or from trusts and foundations, you must show a balanced budget (with neither profit nor loss).

Actual versus Budget
After your event it is useful to insert the actual figures for income and expenditure alongside your budget, and compare the figures (this is known as Variance Analysis).
[See Sample Budget]

Cashflow Forecast

Even if you balance your budget at the end of your project, inflows and outflows of cash do not always coincide, so you need to do a cashflow forecast over the period of time to identify any problem areas when you are likely to be overdrawn at the bank. This is particularly important if you have to pay out for most of your event costs in advance, before your get your ticket sales income, or before you receive your grant. This is most easily done on a spreadsheet, so it can be updated as the project progresses to be as accurate as possible. You should enter the actual figures in place of the forecasted amounts as they become known, and then review the future forecast to identify any effect this has on your future cashflow.

If you are registered for VAT, you need to include any VAT in the figures in your cashflow and then include the quarterly VAT payments or repayments as these can substantially affect your flow of cash. [NB cash here refers to money in the bank, not petty cash.]

Once you can see when the problems are likely to occur, you can take preventive action such as delaying a payment, or applying for funding earlier.

Grant providers will often ask to see a cashflow forecast for your project.

[See Sample Cashflow Forecast]
The formulae are set up so you can substitute your own items of income and expenditure, and the appropriate figures.

Further Information

HM Customs & Revenue - VAT and Gift Aid www.hmrc.gov.uk

Charity Commission
www.charity-commission.gov.uk

Voluntary Arts Network http://www.voluntaryarts.org

Other Related Information Sheets

Introduction to Fundraising
How to write a successful Funding Application
Applying to Trust Funds
Introduction to Sponsorship
Gift Aid
Glossary of Financial Terms